Welcome to the HR Laboratory

When e-commerce firm Zappos.com Inc. first considered a move to a system of employee self-management, known as “holacracy,” its people operations team initially experimented with pilot groups in its own department — an act that revealed challenges the team wasn’t expecting.

“There’s no going to somebody else to ask, ‘Can I do this?’ ” said Hollie Delaney, the Las Vegas-based company’s head of people operations, on the nuances of the self-management model. Decisions are “all owned by the people who own those roles.”

Holacracy effectively removes power from a traditional management hierarchy, distributing it instead across the individuals that make up an organization, team or department. While many smaller firms have operated under a flattened leadership structure for years, Zappos is among the more noteworthy larger organizations to experiment with the unconventional management approach.

Such people management experimentation is rare nowadays. As human resources departments have grown more strategic, the practices and structures shown as effective have become largely institutionalized. As the startup culture continues to pervade business leaders’ thinking, experts say HR departments should find ways to experiment with new and unusual practices.

Persuading Change

In particular, Zappos’ effort to improve its organizational efficiency is an example of why more HR departments should embrace experimentation, said Martie-Louise Verreynne, an associate professor of innovation at the University of Queensland in Australia. Other reasons include responding to changing marketplace conditions and new technologies.

“These may be incremental changes in HR software or more radical changes in, for example, recruitment practices,” Verreynne said.

On the other hand, there are many reasons HR departments typically avoid experimentation, including risk aversion and lack of leadership support. “We have many examples of where very promising HR innovations never saw the light of day as a result of a lack of such support,” Verreynne said.

Still, getting leadership support is attainable, and it is one of the many things talent managers should do to pivot to a culture of experimentation, said Dalton Kehoe, a senior scholar for communication studies at York University in Toronto.

To start, talent managers can get company leaders who are already interested in the potential for change in a given area to attend a workshop or presentation on the topic. Presentations given by other respected leaders in the industry may convince senior leaders that experimentation is worth a try.

“Suddenly, you have an ally,” Kehoe said. “That lets you in the door with senior management, and then you can start working with them on how to move that change outwards up to senior management level and downwards through the ranks of management.”

Additionally, “the No. 1 thing that holds companies back from making changes is success,” Kehoe said. “Something bad has to happen from outside the organization: a radical change in competition, a radical change in the environment” or an accident or issue with products.

Kehoe said talent leaders first should find an area of the organization or department where something isn’t working or could use improvement. Then, after gaining senior-level support, run a pilot program with relatively few people. This pilot should make noticeable change in behavior or processes, “where people would say, ‘Oh, this is actually saving us money or making us money,’ ” Kehoe said.

Kehoe also suggests doing away with the traditional model of human resources, favoring instead a culture of total transparency and a reduction of power akin to Zappos.

“When organizations decide to do away with [traditional] structure, almost immediately they open the doors to all kinds of experimentation,” Kehoe said. “Because, in fact, you’re now leaning on the people in the bottom and the middle of the organization to actually cooperate, collaborate and invent something new that wasn’t there before.”

Zappos’ shift to self-management is a test case of this theory. By switching to holacracy, Delaney said she has seen “an environment of self-organization and distributed authority,” which has made room for greater experimentation in other areas.

Before the change came a process of experimentation, with a goal of figuring out how the self-management model operates as well as if it could be implemented across the organization.

The pilot began with the “circle” of the people operations department who set up different “subcircles.” Groups such as recruiting, employee relations and people systems work on their own pieces of business, self-managing their small teams.

The first iteration of the circles and subcircles proved unsuccessful. “The first meeting we had, I knew immediately we got it wrong because there was nothing to talk about,” Delaney said. So Zappos went back to the drawing board, breaking down the original structure and proposing new ones.

About a year after rolling out the new management method, some employees were completely aligned with self-management while others still opposed the structure. “It was very difficult, especially from an HR standpoint, because you were living in two worlds,” she said.

Eventually, the company decided to draw a line in the sand. If employees didn’t want to stick with the self-management model, employees could choose to take a severance and leave the company. “We want to give everybody the option to leave if this isn’t for them,” Delaney said.

Testing Ground

Companies don’t have to ditch formal authority to embrace an experimental culture, nor do they have to institute major organizational change like Zappos. Instead, talent leaders need to consider a slight shift in mindset.

When designing a new system and wanting to experiment, Delaney said talent managers should consider moving away from traditional ways of thinking. “If you get stuck in how it’s always worked or how it should work, or this is going to be too risky, it shuts down the process, because you’re worried about all these things that exist and you’re not thinking about the ideal of where you want to go and what you want to do,” she said.

In a Harvard Business Review article from earlier this year, professor John Boudreau and Steven Rice, the chief human resources officer for the Bill & Melinda Gates Foundation, advocate for a similar approach. “It’s easy — and tempting — to chase after a new practice, a new expert, or new research that seems to provide some relief or a solution to a problem,” they write. “What’s harder, but far more valuable, is to fall in love with the problem.”

Boudreau, a professor and research director at the University of Southern California’s Marshall School of Business as well as a Talent Management columnist, further explained the concept in an interview.

If, for instance, leadership asks for a new learning system and it’s provided to them, Boudreau said, the problem appears solved. However, talent managers in this situation should be asking deeper questions like why are they asking for a new one to begin with? This questioning will open more dimensions than simply providing a new system, he said, which will help reveal other opportunities for change.

In addition to questioning problems, experiments should be socialized in large groups to get support. IBM Corp., for instance, takes this approach by asking employees for their ideas on new ways of working.

This is done through blogs, roundtable discussions, focus groups and internal networking groups that turn into pilots for programs, said Annette Favorite, the company’s former vice president of talent who is currently the senior vice president and chief human resources officer at West Pharmaceutical Services Inc. Many of the employee-driven pilot programs are ultimately turned into new company policies.

“When they [employees] feel passionate about what we do, it helps us create better policies for them,” Favorite said. “But also, they’re invested in the company. They feel a shared responsibility.”

‘The No. 1 thing that holds companies back from making changes is success. Something bad has to happen from outside the organization — a radical change in competition, a radical change in the environment.’

— Dalton Kehoe, senior scholar for communication studies, York University in Toronto

Another experimental initiative at IBM is what Favorite called “internal redeployment,” where existing employees can relocate to growth markets on temporary assignment. “Think of eHarmony, that dating service. We’re actually doing it with employees in jobs, and we’re matching them based on the jobs they’ve held, experiences they’ve had,” Favorite said.

The employees are intended to provide expertise and help train new hires and existing employees in the assigned country, reducing time-to-productivity, Favorite said. This idea grew to include other programs, such as the company’s Blue Talent Cloud, which allows employees to work remotely more easily.

Another program, Champions for Growth, involves temporarily assigning employees to the company’s business partners. And another program, “Zenith,” focuses on clients.

“We actually improve the client experience because you have somebody there that knows how to operate within IBM,” Favorite said. “You’ve got the expertise on that product or that solution.”

To get approval from leadership for these initiatives, Favorite had to sell their potential return on investment. IBM wanted to grow in other countries, but it’s costly to hire and train employees. “This was an opportunity that we could provide skilled people very quickly and move them to help the country grow,” Favorite said.

Experimenting for these new programs ultimately came with how employees would be compensated under these unique arrangements, Favorite said. Would these employees get paid by IBM or the client companies they were embedded in? The company concluded that clients and business partners would cover these expenses.

With experimentation it’s also important to identify supply and demand factors — especially if programs are voluntary, Favorite said. “You’ve got to make sure that there’s a good value proposition for the employee and for the business,” Favorite said.

Another experimentation method is LinkedIn Corp.’s nontechnical “hackathons.” In July, the social networking firm invited interns to “hack” human resources, Boudreau said. Teams worked overnight to come up with ideas of how to make LinkedIn’s HR system more engaging and motivating. Experts were available to answer questions the teams had, and judges critiqued ideas the event’s conclusion.

Boudreau, a judge for the event, said the idea behind the hackathon is looking at a system and trying to figure out its deepest flaws, “kind of like hacking into a computer system, and then figuring out improvements.”

Not all experts are on board with the idea that HR needs to be hacked. Laurie Ruettimann, an HR consultant who operates her own firm LFR, said it’s not always smart to assume there are problems to begin with. She said LinkedIn’s case is a prime example.

“There were some assumptions made in even having that hackathon that there’s a problem with human resources,” Ruettimann said. “But more and more, I’m not increasingly sure that what we call problems are reliable and valid issues.”

Additionally, Ruettimann is skeptical of the idea of crowdsourcing to problem solve. “You don’t just ask an uninformed population a really important question and expect to get thoughtful answers,” she said. “You have to define the population.” Rather than getting a variety of opinions on a topic, Ruettimann suggests identifying key stakeholders and involving them in the design process.

Whether companies are tapping employees for ideas, running their own hackathons or even ditching traditional notions of authority and hierarchy, Ruettimann said talent managers need to approach everything they do with one question: Does HR need to be doing this?

The answer is often no. When an HR department does want to experiment, however, Ruettimann said leaders should be brave.

“There’s a lot of negative emotion around the field of HR, and everybody thinks they can do your job better than you,” Ruettimann said. “So when you’re faced with all of those odds, just even experimenting is often an act of bravery.”